ANALYSIS: Could aviation see a replay of a post-2008 high production rate environment?

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Following the 2008 financial market collapse, operating lessors and aerospace analysts called upon Airbus and Boeing to cut production by 30-40%. Neither Airbus nor Boeing did, and each successfully managed their skylines through the great recession with no discernable impact to production or aircraft values. Could the same happen this time around?

It has been suggested that the operating lessors' call for production cuts were largely self-serving efforts to bolster their own supply-and-demand and lease rates. Some lessors freely acknowledged that this, indeed, was the case.

But other factors in the original equipment manufacturer's (OEM) increased production rates are also at play. Jim Albaugh, chief executive officer of Boeing Commercial Airplanes, said on several occasions that it was necessary to boost rates on the 737 line to avoid driving customers to other competitors, notably the CSeries.

But the backlogs for the A320 and 737 families are also important factors. At current rates, aircraft are sold out for five to six years. Additionally, with fuel prices heading back up sharply, airlines are demanding more efficient aircraft. The A320neo is scheduled to enter service in October 2015 and the 737 Max a full two years later. Boeing wants to accelerate entry into service (EIS) into 2016, but there is no assurance at this date this can be achieved.

Finally, Airbus and Boeing simply need the cash flow. Airbus' A380 still is a cash drain; the A400M and A350 are in development; Boeing's 787 programme still is in disarray and the 747-8 is struggling to find customers and it is in a forward loss position.

Boeing is also preparing to launch the 777X as early as this year. While the aircraft will be a derivative, there will still be several billion dollars of research and development required.

Upping production

Airbus will go to a rate of 42 per month by the end of this year and is considering a boost to 44 units. Boeing plans to hit a rate of 42 by 2014. Both companies are considering rates as high as 60 per month.

Airbus produces aircraft 11 months of the year while Boeing is on a 12-month production schedule.

In its 2011 20-year forecast, Boeing predicts there is a need for 23,370 single-aisle aircraft in the 90-210 seat category. Airbus predicts 19,165 in the 100-210 seat market.

Based on the announced production rates, and assuming no changes through the 2030 forecast period in production-or for adjustments in the forecasts-Airbus and Boeing will produce 18,551 single-aisle aircraft.

If both OEMs go to rate 60 by 2016, their combined production exceeds their own single-aisle forecasts.

Deliveries by Bombardier and Embraer, which have current offerings in the 90-125 seat market, are not included. Neither are deliveries by emerging competitors COMAC, Irkut and Mitsubishi.

Bombardier’s CSeries (100 to 149 seats) is scheduled to enter service in late 2013. A slow ramp-up is planned to only 48 per year by 2016. Bombardier announced that it has the capacity to produce 20 per month or 240 per year, but no timeline has been suggested.

COMAC’s C919 at 158-210 passengers is supposed to enter service in 2016, but analysts expect a delay of at least two years. A production ramp-up has not been revealed. Irkut’s MS-21, also 150-210 seats, likewise has an announced EIS of 2016 but observers believe this, too, will be late. No ramp-up is known.

Mitsubishi recently announced a delay to its 70-90 seat MRJ programme, but it did not announce how long.

Deliveries for the 100-seat Sukhoi SuperJet are also not factored into the estimates.